Labour’s Minimum Wage – Britain Can Be A Beacon To The World

We do all, of course, want the UK to be a beacon of shining hope in this perilous and depressing world. Therefore we should welcome the claims being made by the Labour Party about its wondrous new minimum wage offer:

Labour have promised an immediate pay rise of up to £6,000 for minimum wage workers.

And the party has vowed its ‘real’ living wage would mean at least £9,000 more in the pockets of workers by 2024 than the Tories.

Workers who currently earn a minimum wage job would get an immediate pay rise of between £3,444 and £5,986 under the party’s plans.

Their promise to immediately introduce a £10-an-hour Real Living Wage for all workers over 16 will give approximately 7.5 million people a pay rise, including more than 1.2 million young people, according to their analysis of ONS figures on earnings.

That’ll be government determining the wages of some 25% of the workforce. And price fixing always works so well, doesn’t it?

That is, this really is going to make Britain that shining beacon – of what not to do. If it gets implemented then the textbooks are going to be talking about this for decades into the future. Here’s what happens when minimum wages are too high. The definition of too high being what Grandpa Death brought in in 2019 in the UK.

By the way, just to lay down a prediction of what will happen. A substantial and sustained rise in the unemployment rate for those 16 to 18 and a large, but smaller, rise in that for those 18 to 24. Our definition here being compared to the unemployment rate for those 25 and older.

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Bloke in North Dorset
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Bloke in North Dorset

Not withstanding the arguments over the rate of minimum wage, the best argument I have heard for a minimum wage came from an economic right winger and I’ve never heard the left use it:

The nature of the workplace has changed and is fragmented. This has led to fewer opportunities for collective bargaining (free association and all that) and tipped the scales in favour of the employer. NMW is an attempt to balance the scales.

I didn’t say it was a good one, just the best I’ve heard, absence full employment.

Spike
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Spike

You cannot, in the long run, get more pay than you are worth to your employer, by: (1) legislation; (2) collective bargaining; (3) holding a gun to your employer’s head. Though in the short term he may find it less strenuous to pay you than to sack you. So the argument that we need (1) because we no longer have so much of (2) is nonsense.

Jim
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Jim

No, but BiND has a point. If (say) all Sports Direct workers were unionised, and threatened to walk out every five minutes they could undoubtedly get more pay than they get now, where the management can hire and fire almost at will, and pay the minimum possible. Now if they demanded too much extra then SD would eventually go bust of course, but one does suspect that there is an element of owners taking the piss, because they can. Its only human nature.

Spike
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Spike

Management pays the minimum possible, and workers seek the maximum possible. They do not accept less for their efforts by some natural human inertia. Management would only underpay if there were no threat of workers quitting for a better-paying job. That is, in the absence of collective bargaining, there is individual bargaining, some of it implicit. The reason unionization has waned in our “fragmented” labor market is that it is hardly worth hiring the pinkie-ringed business agent to negotiate for you.

Jim
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Jim

Yes but if the workers were bargaining collectively (and threatening to withdraw their labour collectively) then one suspects they’d get a better deal out of Mike Ashley than they get as individuals. If Joe Immigrant decides that SD wages and conditions are sh*t and walks, he can be replaced in a flash, the effect on the business is zero. But if the entire workforce up sticks and strike, then the business has to consider their demands a bit more carefully, because no workforce equals no business equals no profit. So if they are making a bit of excess profit due… Read more »

Spike
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Spike

It might not be productive to debate with someone who sees unionization as a quest to take “excess profit” from “rapacious” management, harmful only if it should “overreach.” But a single resignation does not have “zero effect” on the business, if management believes it is likely to catch on; it will tend to improve pay and work conditions. The claim that we will all shake loose more money if we threaten together (exceeding the cost of the agents) is not borne out by those whose decision it is; they are not unionizing, and they know their business.

Bloke in North Dorset
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Bloke in North Dorset

In the long run we’re all dead.

I know all the arguments and lived through the ’60s and ’70s when union power destroyed more wealth than was created. But we’re not living in an ideal world and some people need protecting from exploitation by their employer as well as their union.

Spike
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Spike

“Protecting” by whom? Ah, government! and “who protects us from our protector? Regarding destroying more than it created, how exactly does one create more than one destroys, using “power”? In fact, the individual protects himself not just from underpayment but from “exploitation” by his ability to go elsewhere, in this or an ideal world.

The Mole
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The Mole

If 25% of the population suddenly get a 30% pay rise what will be the impact on inflation? I assume within a few years that ‘real living wage’ will have been devalued as the cost of everything rise and there will be calls to increase it to the ‘actual real living wage’ of £15. Along with complaints that the benefits received by all those newly out of work aren’t enough to live on…

Spike
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Spike

There will be no impact on inflation unless the monetary authority prints more money. But where does that 30% raise come from? If the company spends more on salaries, on what does it spend less? If it raises prices (and retains its customers), on what do THEY spend less money after paying those higher prices? Does it simply under-reward managers or investors? Without consequences? The business had found a price point at which it could satisfy customers, employees, and investors. Saddling it with these new costs will tend to make the product not worth the price or the company not… Read more »